Apple's iPhone - a smash success in North America - can't as yet be updated with music unless it's connected to a computer or is within a Wi-Fi hotspot. However, this summer a new iPhone is expected to be announced with 3G capabilities that would allow high-speed downloads over a mobile phone network. "They want a big launch in June," one label executive told the New York Times. And so this week Apple finds itself back to the bargaining table, negotiating terms for a new means of distribution.
On the surface, these would seem like straightforward negotiations. Apple has new technology that would allow it to sell more songs - including ringtones - to millions of customers and record labels could certainly use this revenue. There is, however, a hurdle in the way of Apple's sprint to the profiteers' finish line: variable pricing.
For years, Apple CEO Steve Jobs has insisted that the only way to make online music sales work is to have strictly consistent pricing. Every song in the iTunes Music Store sells for 79p. There are discounts for full-album purchases and the occasional free track, but otherwise things are dead simple - and this model seems to have borne fruit: iTunes is the number one music seller in the world.
But labels hate this approach to consistency in pricing. They want to be able to sell hits by Leona Lewis for more money and back-catalogue sleepers for less. Apple has been adamant in its opposition; at similar talks with TV networks, Apple let NBC walk away from the table rather than accept the network's demands for variable pricing for TV show downloads.
Things have changed, however. Apple has come to record labels, hat in hand, for mobile delivery licensing deals. And according to Wired and the New York Times, the labels are making a renewed play for variable pricing. A chink already appeared in Apple's armour this spring, when it announced a two-tier pricing plan to download HBO TV shows.
Though negotiations continue, record labels may at last have Apple where they want them. And while it will be nice to be able to buy an Amy Winehouse ringtone no matter where we find ourselves, we're not sure whether it's worth the frustration of discovering that the new REM album is selling at an inflated premium.
A note to labels: sometimes dead simple is just right.
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